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New Orleans Sewerage & Water Board looking down the road at a new drainage fee

By Richard Rainey, Nola.com / The Times-Picayune
May 13, 2013

On the heels of one of the largest water and sewer service rate increases in memory, the New Orleans Sewerage and Water Board is contemplating a new drainage fee to cover capital improvements, operating expenses and the city’s share of federally financed drainage projects. The bill for those projects is expected to come due starting in 2014.

The S&WB’s Finance Committee last week asked the full board of directors to extend a contract with Raftelis Financial Consultants Inc., a Charlotte, N.C., firm first hired in 2009 to draft a long-term financial plan for the century-old utility. The full board is expected to consider the extension, which would pay Raftelis an additional $295,405 to study the drainage fee, when the board meets Wednesday.

S&WB spokesman Robert Jackson said Monday it could be another two years before the study is finished and five years before any fee is proposed to the city. “It’s just hard to nail down,” he said. “In terms of a timetable right now, there isn’t any.”

The new fee would need approval by the City Council and the voters.

The fee, which Raftelis outlined in its 2011 financial plan for the S&WB, would be the latest component of the agency’s long-range financial strategy as it grapples with how to repair and run its aging networks of pipes and canals.

Raftelis reported that the city’s drainage system needs $1.1 billion in upgrades, although the federal government is expected to pay for $821 million of that through FEMA and the Southeastern Louisiana Urban Flood Control Program, or SELA.

Should the S&WB rehire Raftelis, the firm’s first task would be recalculating how much the drainage fee would increase each year, since a deadline to impose it this year has come and gone, S&WB Deputy Director Bob Miller told the committee last week.

Raftelis had calculated in 2011 that if the fee were imposed this year, a typical single-family residence on a 5,500-square-foot lot would have begun paying an additional $4.21 a month in January. That figure would have risen to $22.74 by 2020. A 6,300-square-foot business would have begun paying $4.98 in January, rising to $26.89 by 2020.

Jackson said the S&WB had no estimate on how much the new fee would raise. That would be included in the new study, he said. He also said the total compensation to Raftelis for its work with the S&WB wasn’t immediately available Monday.

The fee would be separate from the water and sewer rates and sanitation service fees that appear on monthly water bills. The water board pays for current drainage operations through property taxes that generate about $16 million a year.

The S&WB has said an urgent need for more money is the looming local match to cover the costs of the SELA program. When Congress approved $1.3 billion in 2008 for SELA work, it required local and state governments to pay for 35 percent of the projects’ cost. Local parishes and municipalities, including New Orleans, later negotiated to pay back the money over a 30-year period that begins in 2014, when the corps expects to finish the drainage construction. That debt could cost the S&WB $15.4 million a year, according to Raftelis’ study.

Executive Director Marcia St. Martin told the Finance Committee there are places to save money within the S&WB’s estimated future spending. She noted that the actual annual cost to run the West Closure Complex, a major floodgate and pump station structure built to fight a storm surge like the one seen during Hurricane Katrina, has proved to be only about $750,000 — considerably less than the $6 million the S&WB had initially predicted. She said the projected $12 million in annual operating costs for the soon-to-be-finished pump stations along New Orleans’ three outfall canals at Lake Pontchartrain could undergo a similar reduction.

Persuading New Orleanians to support a new drainage fee is likely a thornier prospect than advocating for the water and sewer rate hikes that started four months ago and will increase by 10 percent each year for the next eight years. While those rate increases needed the backing of the S&WB board of directors, the city’s debt managers and the City Council, a drainage fee would need voters’ approval as well.

Under the proposed contract extension, Raftelis would make recommendations on how the fee would be collected and how it would be presented to skeptical residents and businesses. Miller told the Finance Committee that Raftelis would look at options such as basing the fee on the size of a lot, the amount of water runoff it generates or how much of a lot is covered in concrete, among others.

The firm would also examine whether to have the S&WB take over that portion of the drainage system now managed by the the city’s Public Works Department. At present, any pipes with a diameter larger than 36 inches fall under the S&WB’s jurisdiction, while City Hall is responsible for catch basins and smaller pipes that tie into residences, businesses and other buildings. It’s unclear how such a transfer would affect the roughly $21 million that Mayor Mitch Landrieu’s administration wants the water board to pay the Public Works Department for past emergency utility repairs.

Raftelis has been analyzing the water board’s policies and plans for various stakeholders for more than a decade. The Bureau of Governmental Research, a private watchdog group that has been advising the S&WB about reforming its governance structure, hired the firm in 2002 to review ill-fated plans to privatize the S&WB. And the City Council hired Raftelis in 2007 to review a 2005 recommendation to raise water rates. After the firm endorsed the rate hikes, the council voted to approve them through 2011.

The Lens reported on the Finance Committee’s recommendation last week.

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